Although the worst is over for the building industry, there is a high chance that in the US, housing prices will fall further.
One of the signs that I watch is the mortgage purchase applications index. The reason this is important is that it gives a leading indicator to home sales because home sales generally lag the mortgage application by as much as 2 months.
The index was very positive 2-3 months ago, as the government tax credit moved demand forward, but has, as expected, fallen off a cliff since the expiry of the tax credit for housing. The latest weekly reading has mortgage purchase applications falling by 3.1% to a low not seen since 1996, meaning that over the next number of months, home sales will also fall off a cliff.
It does not necessarily mean that home prices will fall dramatically (housing markets are local, and in some markets, prices may have bottomed already) but when demand falls, prices typically are not that far behind.
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